Tuesday, December 23, 2008

Bernie Madoff: Ponzi For The Long Run

What is most puzzling is how one person could create and maintain such a intricate scheme. Just for instance, wouldn't the auditors (a small firm) have seen what was going on? How about those that invested with him?

Or even those people supposedly placing trades etc. It leads many to the conclusion that he either had help, or is a genius, or both.

"Sixteen years ago the Securities and Exchange Commission cracked down on what was then one of largest ever sales of unregistered securities. Investors handed $440 million to two Florida accountants who promised unbelievable annual returns of 13.5% to 20%....How did the two investors deliver the promised returns? They had help from a powerful New York figure. You see, at the center of the scam was a mysterious money manager who authorities declined to name because they never charged him with wrong-doing....That man was Bernie Madoff.....accountants were represented by Ira Lee Sorkin. The same lawyer, a former prosecutor turned defense attorney, is now representing Madoff."

Clearly in any big blow up, some will be eating crow. In this case there are many, but possibly the largest portions may be saved for Fairfield Greenwich Group.

"Opinions about how Fairfield Greenwich Group came to incinerate $7 billion of client cash at the hands of Bernie Madoff vary from "incompetent" to "criminally negligent" to "co-conspirators." Regardless of where the truth lies, one thing is certain: FGG wasvery proud of its due diligence and risk management processes....They will show that, day after day, the professionals at FGG were fooled by an amazingly intricate fraud in which Madoff figured out, retroactively, at the close of business each day, bogus trades that added up to the reported return and stayed within FGG's vaunted risk parameters--and then emailed this spreadsheet to FGG so they could feed it into their system."